Rates
for Idaho Power Company customers will decrease an average 5.2 percent as the
result of four rate adjustments approved today by state regulators.

The
Idaho Public Utilities Commission approved the annual Power Cost Adjustment, an
average 6.5 percent decrease, and three smaller increases. The percentage of
decrease will vary because the adjustments don’t apply to all customer classes
and vary in size according to customer class. For residential customers, the
PCA decrease is 3.2 percent and the overall rate decrease, after the increases
in the three other cases, is 1.4 percent. The adjustments are effective June 1.

Below
is a summary of the four rate adjustments.

Power Cost
Adjustment (6.5 percent decrease) – Every year on June 1, customers receive
either a one-year surcharge or credit, depending on streamflows and market
conditions from the previous year, a forecast of the next year’s conditions and
a true-up of the previous year’s forecast.

This
year’s power supply costs not included in base rates are anticipated to be
$42.2 million, far less than 2009’s $188.9 million, resulting in a PCA
reduction of $146.7 million. As the result of a stipulated agreement reached
with Idaho Power in January, $88.7 million of that PCA reduction will be
included in permanent base rates, thus avoiding an Idaho Power rate case this
year. The January agreement stipulates that Idaho Power base rates will not
increase again until January 2012 at the earliest. The remaining $58 million of
the PCA reduction goes directly to customers. The impact on the PCA surcharge
is a reduction from 1.4 cents per kWh to 0.31 cents per kWh.

The
power cost surcharge covers expenses, not already included in base rates, which
Idaho Power incurs to provide energy to its customers. During low water years,
Idaho Power must rely on more expensive sources of power than that generated
from its 17 hydroelectric plants. Power supply expenses vary due to the always
fluctuating prices for natural gas or changing market prices for wholesale
power, thus the need for a yearly adjustment to rates. None of the money
collected from the PCA surcharge can go to increase company earnings, but can
be used only to pay off power supply and related expenses.

(The
percentages of increases for the three adjustments below are based on base
rates in place before June 1.)

Automated meter
installation (0.41 percent increase) – Idaho Power may include $2.36 million in
base rates for the second year of a three-year installation of automated meters
throughout its territory. The company is replacing its existing meters with
advanced metering infrastructure (AMI) that will eventually allow customers to
monitor electric prices and adjust their use to take advantage of lower
price-periods. Idaho Power submitted a cost estimate of $71 million for the
project and will absorb any costs above that. At the end of the second year,
expenditures are at $47.3 million.

In early
2009, the commission directed Idaho Power to "move forward with all
deliberate speed" with installation. The meters were installed last year
in the Boise area and are being installed this year in Canyon and Payette
counties and surrounding regions. During 2011, meters will be installed in the
Magic Valley, Pocatello and Salmon areas.

The
advanced meters can be read from a remote location, negating the need for an
Idaho Power representative to access customer properties. They can provide the
company and individual customers with hourly meter readings and inform
customers of current electric prices, allowing them to manage their use and
reduce their bills.

“As we did
in 2009 … we continue to find that both present and future public convenience
will be served through the enhanced outage management and billing accuracy, as
well as reduced operating and maintenance expenses,” the commission said.
Implementation of AMI “will inevitably benefit customers and lower the pressure
for increased rates,” the commission said.

Fixed Cost Adjustment (1.85 percent
increase)
– The commission is allowing the company to recover about $6.3 million in under
collected fixed costs from residential and commercial customers.

The
FCA was implemented in 2007 as a pilot program. The FCA allows Idaho Power to
recover the fixed costs (but not to exceed 3 percent) it loses when
conservation programs result in lower power sales. Without a mechanism like the
FCA, there is a financial disincentive for utilities to promote energy
efficiency and conservation programs because they lose money when those
programs are successful. The FCA allows Idaho Power to recover its fixed costs
as established in the most recent rate case. If the company under collects its
fixed costs, customers get a surcharge.Conversely, if the company over collects fixed costs, customers receive
a credit, as they did in the first year of the program.

This
year, Idaho Power reports it under collected $5.17 million in fixed costs from
the residential class and $1.16 million from the small-business class. This was
due largely to a 7.6 percent increase in energy savings during 2009 and a 28
percent reduction on the company’s energy demand during peak-use periods.

The
Idaho Conservation League submitted comments supporting the FCA, but said the
commission should require Idaho Power to “better articulate the benefits
customers receive from the FCA mechanism.”

The
expansion of conservation programs since implementation of the FCA help keep
rates lower than they would otherwise be. Reducing demand on a utility’s
generating system, particularly during times of peak-use, is less expensive per
kilowatt-hour than building new power plants to meet demand. By enrolling in conservation
programs, customers can benefit by using electricity more efficiently, reducing
consumption and bills. Even customers who don’t directly participate benefit
because the cost of the electricity saved system-wide through these programs is
about half the cost of electricity generated by a new power plant.

The
FCA will continue as a pilot program for two more years to allow for more data
to accumulate and to correct problems.

Pension Funding
(0.77 percent increase) – The commission is allowing Idaho Power to increase
rates by 0.77 percent to allow it to collect $5.4 million over 12 months to
replenish its pension plan. The company’s contributions to its pension plan have
always been included in base rates. However, since 2003, Idaho Power was not
required to contribute to the pension plan because the market value of the
plan’s assets was more than enough to cover future obligations. Recent market
conditions and increasing pension obligations require Idaho Power to begin
funding the plan again. The commission said this year’s amount due may be
recovered over 12 months, but cautioned Idaho Power that recovery of this
year’s expense does not ensure the same level of benefit in future years.

The
commission suggested Idaho Power consider alternative pension plans. “It is
unreasonable for Idaho Power’s customers to be solely responsible for large
contributions to the company’s defined pension plan. Many employers in recent
years have replaced their defined benefit plans with pension programs that
place greater responsibility and investment risks on employees. Idaho Power
must similarly consider changes to its retirement plan and address shareholder
and employee liabilities in the assignment of pension plan investment risk. The
commission will not approve additional pension plan contributions from
customers without evidence that Idaho Power has carefully reviewed alternatives
to reduce the burden placed on customers.”

The
commission’s orders in all four cases are final. Interested parties may
petition the commission for reconsideration by no later than June 18. Petitions
for reconsideration must set forth specifically why the petitioner contends
that the order is unreasonable, unlawful or erroneous. Petitions should include
a statement of the nature and quantity of evidence the petitioner will offer if
reconsideration is granted.

Petitions can be
delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O.
Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.

A full text of the
commission’s orders, along with other documents related to these cases is available
on the commission’s Web site at www.puc.idaho.gov.
Click on “File Room” and then on “Electric Cases” and scroll down to these case
numbers:

IPC-E-10-06 for
Advanced Metering Infrastructure; IPC-E-10-07 for Fixed Cost Adjustment;
IPC-E-10-08 for pension expense recovery; and IPC-E-10-12 for the Power Cost
Adjustment.